David's Portfolio Journal

I am currently long the Nikkei and short the Australian XJO against it. Not in big size, just a speculative trade.

My only real reason is that with the Bank of Japan demonstrating a willingness to further stimulate their economy (which can't get much worse going by recent trade figures), a weakening of the Yen should give domestic earnings a much needed boost in an export driven economy. Conversely, Australian companies are struggling to record earnings growth with the Australian dollar so strong, and with the RBA's reluctance to reduce rates further, this looks set to continue, giving investors fewer reasons to buy the index. I have more details on www.pimmtrading.blogspot.com, but this is essentially it.

The risk is that the world rights itself, and the higher beta play (Australia) is back in favour due to its exposure to Chinese growth, and this trade blows up quickly.
 
Since the short Australian SPI long Japanese Nikkei trade was put on (evening of 21st Aus time), the SPI has lost 10 points (0.23%) and the Nikkei has risen 135 points (1.4%), so the trade is up 1.63% so far. I don't trade all that frequently, so it's important for me to hang onto these profitable ones and ride them out. As such, this one won't be closed out yet.

The brent/crude oil spread is back around $17, from as small as $15, so there's still a short spread trade there medium term. I'll hang onto the trade, the fundamentals are still intact, and there's a $1100 profit per contract atm.
 
I haven't taken any new positions, just kept the current two on, and haven't got any need to at the moment. Momentum is just event driven, making trading choppy and far harder than it needs to be.

The light crude/brent spread is still coming in slightly, and I'm happy to hold on to the medium profit sitting there. The fundamental reasons for it are still intact, and so is the trade.

Since it was put on on the 21st, the Australian XJO is down 0.8%, in comparison to the Nikkei being up 2.58% (recall I was long Nikkei and short XJO), taking the current profit to just under 3.4%. Whilst the trade is working I have no intentions of cutting it, but should the profits reach 5%, on a delta neutral trade, I'd be pretty tempted to take it off.
 
Both trades are still on, they're the only ones I've placed in a fair while. Normally I'm tempted by intraday price action, normally based on momentum swings, but whilst these two are going well I don't feel the need to push for higher returns and up the risk. The nikkei is up 4.92% and the XJO is down 1.82%, bringing the profit from the pairs trade up to 6.74% now, almost double what it was last week. Whilst the Yen is weakening further I'll leave it on, despite this being an unusually large % profit to hold onto with futures positions.

The WTI/Brent crude spread is back out to just over $18, making me wish I'd taken the decent profits whilst I had them. Now re-evaluating whether I'd make the same trade looking at the charts now, as I'm effectively back where I started.
 
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